Abstract T lymphocyte activation is tightly regulated to ensure effective elimination of invading pathogens as well as maintaining tolerance against self-tissues. On one hand, T cells are regulated by extracellular signals, especially the positive and negative costimulatory molecules on antigen-presenting cells, and on the other hand, also by delicate intracellular signal transducers and regulators. Recently, we found that T cells activated in the absence of both CD28 and ICOS costimulation became nonfunctional and nonresponsive, supporting a critical role of costimulation in T cell activation. These tolerant T cells not only were anergic with profound defects in TCR signal transduction but also completely lacked expression of effector-specific transcription factors. Interestingly, expression of Grail (gene related to anergy in lymphocytes), was only upregulated in T cells when both CD28 and ICOS signaling were absent. Grail is an E3 ubiquitin ligase whose expression was previously found to be associated with CD4 T cell anergy in vitro and in vivo. Blocking of negative costimulatory signals (B7S1, B7-H3 or PD-1) restored T cell function, associated with expression of effector-specific transcription factors and down-regulation of Grail expression. To determine the function of Grail in T cell activation and tolerance, we developed a Grail mutant mouse model. We found that Grail-deficient T cells were not dependent on CD28 and ICOS signaling in activation and effector differentiation in vitro. Our central hypothesis for the current study is that Grail molecule critically regulates T cell tolerance and function. We will first analyze the role of Grail in peripheral T cell tolerance. In addition, we will determine the mechanisms whereby Grail regulates T cell tolerance. Secondly, we will analyze the function of Grail in generation and function of natural and inducible Treg cells. Lastly, we will assess whether Grail deficiency will lead to susceptibility to autoimmune diseases and whether this is caused by defects in nave and/or Treg cells. These proposed studies will greatly advance our knowledge on Grail function in peripheral tolerance and autoimmune responses.